Social media company Twitter is taking a poison pill to prevent a takeover by Tesla CEO Elon Musk.  

The poison pill provision makes an acquisition less attractive as it allows existing shareholders to purchase shares at less than market value.

On Friday, Twitter announced that its Board of Directors had adopted a limited duration shareholder rights plan (the “Rights Plan”). The plan will expire on April 14, 2023.

Twitter said its plan “is intended to enable all shareholders to realize the full value of their investment in Twitter.” 

The Rights Plan will enable Twitter’s shareholders to realise the full value of their holdings in Twitter. It reduces the likelihood that any entity, person or group gaining control of Twitter without paying existing shareholders or without allowing the Board to deliberate and take actions in the best interests of shareholders.

The rights come into effect if an entity, person or group acquires beneficial ownership of 15 per cent or more of Twitter’s outstanding common stock in a transaction not approved by the Board.

If the ownership threshold is crossed, each right will entitle its holder to buy additional shares at the then-current market value of twice the exercise price of the right.

The social media giant said that additional details on the rights plan will be disclosed in a filing with the U.S. Securities and Exchange Commission (SEC).

The Twitter board met on Thursday after Mr Musk’s offer to acquire the social media company for $54.20 a share in a deal valued at $41.4 billion.

Mr Musk had revealed his intentions to take the company private and “unlock” its “extraordinary potential.”

This new development follows the Vanguard Group taking over from Mr Musk as Twitter’s largest shareholder and disapproval from top shareholder Saudi Prince Al waleed bin Talal on Thursday.